Despite repeated commitments, the Association of Southeast Asian Nations (ASEAN) has yet to accomplish the key goal of reducing or eliminating non-tariff barriers (NTBs) to trade, which are obstacles to the region’s economic progress and integration, says a new report.
The joint report, launched June 22 by the EU-ASEAN Business Council (EU-ABC) and ASEAN Business Advisory Council (ABAC), highlights the business community’s concern over the proliferation of NTBs and how this “risks undermining progress and slowing economic growth.”
The report, “Non-Tariff Barriers in ASEAN and their elimination from a business perspective,” examined barriers to trade in automotive, agri-food (alcoholic drinks, biscuits and seafood), and healthcare, identified as key priority sectors for ASEAN for some time.
For the ASEAN automotive industry, the sector is poised to experience stronger economies of scale and further growth, said the report. “However, the automotive industry is still affected by a broad suite of challenges that prevent the development of a truly integrated automotive industry.”
These challenges are due to controls in the form of quotas and licensing, complex conformity assessment procedures, unique national standards, high taxation regimes, and discriminatory policies favoring local manufacturers, said the report.
These hindrances add cost to the automotive industry and to consumers, delay the delivery of new technologies, and frustrates the creation of a genuinely competitive global industry, it added.
For the Philippines, the report noted that the country has long struggled to develop its own automotive manufacturing industry with a variety of policy mixes tried over the decades.
“It is the smallest of the ASEAN motor vehicle producers with production in 2017 accounting for 3.5% of the vehicles produced in ASEAN. Its industry has been undermined by used car imports and its current taxation arrangements are seen to favor imported small cars and pickup trucks,” said the paper.
The agri-food sector-essential for the ASEAN economy as a driver of food security and a source of export earnings-also faces many regulatory and technical constraints. Firms operating in the agri-food sector frequently report facing regulatory and technical constraints that create delays, impose costs, increase risks and add unnecessary complexity.
“Overall, a lack of harmonized regulatory requirements for agri-food products in the region represents significant costs for trading businesses and as a result presents a significant negative impact on trade, especially intra-regional food sector trade,” the report said.
For alcoholic drinks, opportunities continue to be undermined by high levels of taxation, often associated with counterfeit trade, complex licensing procedures, increasingly burdensome labelling requirements, and marketing restrictions.
Rising income levels across the world provide both the boon of higher seafood demand as well as the challenge for greater food safety standards. “While firms interviewed in the project did not highlight many major obstacles to trade, seafood exporters still face inconsistencies during customs procedures, and strict conformity assessment and product registration procedures,” said the document.
The ASEAN biscuits sector is rapidly expanding as consumption around the world increases. Even in an area of relatively lighter regulation, biscuit makers still struggle with inconsistencies in customs clearance, complicated product registration processes, and national halal certification standards.
On the other hand, fueled by an expanding middle class, a rise in personal income and a surge in private insurance coverage, ASEAN’s healthcare sector is instrumental in meeting the needs of growing middle income and often ageing populations.
However, ASEAN’s pharmaceuticals sector-one of the fastest growing in the world-is affected by an underdeveloped IP regime, inconsistent, discriminatory and opaque government procurement processes, and limited access to the public pharmaceuticals market.
The report set out a number of recommendations to ASEAN, aimed at helping the region accelerate the removal of NTBs.
It concluded that “absent a much clearer, more sustained and tighter focus on reducing the number and scope of existing NTMs and eliminating NTBs, ASEAN will not accomplish the objectives of the AEC and it will fail to meet the targets contained in the Blueprint 2025. Growth will not be as high as ASEAN Member States could have achieved and much of the promise embedded in the ASEAN exercise will have been lost.”
The report was prepared by the Asian Trade Centre, commissioned by the EU-ABC and ASEAN-BAC.